 "P Chidambaram")
Former Finance Minister and senior Congress leader P Chidambaram on Friday questioned the Central Statistical Organisation's GDP growth figure and termed demonetisation a fixed match between the government and Reserve Bank of India (RBI).
He said demonetisation has interrupted India's economic story and "to recover from this, it would take between 12-18 months, maybe right up to the end of 2017-18".
"Look at the CSO's numbers, it seems nothing has happened to the economy. The dazzle of the number cannot hide the fact that crores of people in the country have been devastated," said Chidambaram.
"The government has changed the methodology. The Gross Value Addition (GVA), when they add taxes to it and subtract subsidies, they arrive at the GDP," he added.
Chidambaram further said: "The additional tax revenue is not a reflection of growth. Equally being stingy on subsidies doesn't impact growth."
Giving out quarter-wise GVAs of three years, Chidambaram said: "In 2014-15, quarter-wise GVAs were 7.26, 7.91, 6.29 and 6.19 per cent. There is no particular trend. It went up and came down. In 2015-16, the numbers are 7.75, 8.44, 6.95 and 7.42 per cent. Again it doesn't show any trend.
"The three quarters of 2016-17 show it was 6.90, 6.69 and 6.61 per cent. It is a clear declining trend. Demonetisation took place almost bang in the middle of the third quarter. The Q-4 number will tell us whether the declining trend is continuing or it is in fine fettle," said Chidambaram.
"But, even these numbers hide something. Demonetisation did not affect three sectors. It did not affect government expenditure, agricultural production and utilities (example: electricity bills, municipality bills). The real way to look at GVA is to look at the net of government expenditure, agricultural production and utilities," he added.
He further clarified: "If you look at it that way, the real numbers for the last four quarters would be 8.76, 7.35, 6.47 and 5.73 per cent. The decline is steeper. It is very perceptible. It dropped almost 3 percentage points. It is clear that the economy has slowed down even before the full impact of demonetisation."
"If the impact of demonetisation is measured in the fourth quarter numbers, one would find it has deepened further. The government won't answer these questions or numbers. The fourth quarter will only confirm the fact that the economy has declined and it was hit very badly by demonetisation," he said.
"Demonetisation is not the answer to black money elimination, eliminating corruption or stopping fake currency. Those who generated black money in old currency will now do it with new currency, or even pay bribes in new currencies. Even new currencies can be counterfeited," he added.
He further said demonetisation was done not on the recommendation of the RBI to the government of India but on the diktat of the central government to the RBI.
"On November 7, the government wrote to the RBI nudging RBI to approve of demonetisation. Next day RBI board was summoned at short notice. Only two independent directors attended the meeting and in half-an-hour, the RBI board wrapped up its discussion and obediently recommended to the government that currency should be demonetised," said Chidambaram.
"RBI was asked if there was an agenda note or background paper or research note that weighed and explained the pros and cons of demonetisation. RBI has refused to give any answer or make public any document. In fact there was no document.
"We asked about cabinet note, the answer was a deafening silence. Every norm and procedures were violated in taking the decision," Chidambaram added.
